Old Pension Scheme Vs New Pension Scheme

  • March 10, 2022
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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Old Pension Scheme Vs New Pension Scheme

TOPIC: Governance

Section: Schemes

Context- Recently, Rajasthan and Chhattisgarh announced the restoration of the old pension scheme (OPS) for government employees for the year 2022-2023.

Concept-

NPS vs OPS:

The old pension scheme was done away with in December 2003 by the BJP-led central government when Atal Bihari Vajpayee was prime minister. Its substitute, the National Pension Scheme (NPS), took effect from April 1, 2004.

New Pension SchemeOld Pension Scheme
In the NPS, the government and employees contribute an equal portion towards the pension fund.The old pension scheme was defined as opposed to the investment return-based NPS.
The minimum payment to retired employees as pension is ₹3,500 in the NPSThe old scheme provided 50% of the last drawn salary as the pension.
NPS provides a pension fund on retirement which is 60 per cent tax-free on redemption while the rest needs to be invested in annuity which is fully taxable.Income from OPS is not taxed.

Pension Fund Regulatory and Development Authority:

  • It is the statutory Authority established by an enactment of the Parliament, to regulate, promote and ensure orderly growth of the National Pension System (NPS).
  • It works under the Department of Financial Services under the Ministry of Finance.
  • It performs the function of appointing various intermediate agencies like Pension Fund Managers, Central Record Keeping Agency (CRA) etc.
  • It develops, promotes and regulates the pension industry under the NPS and also administers the Atal Pension Yojana.
Governance Old Pension Scheme Vs New Pension Scheme